Correlation Between Baozun and Tesla

Can any of the company-specific risk be diversified away by investing in both Baozun and Tesla at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Baozun and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baozun Inc and Tesla Inc, you can compare the effects of market volatilities on Baozun and Tesla and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Baozun with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baozun and Tesla.

Diversification Opportunities for Baozun and Tesla

-0.29

Correlation Coefficient

Baozun  Tesla

Very good diversification

The 3 months correlation between Baozun and Tesla is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Baozun is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Baozun Inc are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Baozun i.e., Baozun and Tesla go up and down completely randomly.

Pair Corralation between Baozun and Tesla

Given the investment horizon of 90 days Baozun Inc is expected to generate 1.1 times more return on investment than Tesla. However, Baozun is 1.1 times more volatile than Tesla Inc. It trades about 0.18 of its potential returns per unit of risk. Tesla Inc is currently generating about -0.28 per unit of risk. If you would invest  229.00  in Baozun Inc on January 24, 2024 and sell it today you would earn a total of  26.00  from holding Baozun Inc or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Baozun Inc  vs.  Tesla Inc

Baozun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baozun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Baozun is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Tesla Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Baozun and Tesla

The main advantage of trading using opposite Baozun and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baozun position performs unexpectedly, Tesla can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tesla will offset losses from the drop in Tesla's long position.

The idea behind Baozun Inc and Tesla Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.